The TRUTH about quinlashes post First off you may want to read over the MD&A document on their website, it states that the company has the capitial (cash) available to address the next year. With the SP over .30 it also has access to KAOS funding to the level of 180 Million (in exchange for shares on an as-needed basis).
Unfortunately, mr quinlashes continues to post inaccurate and misleading statements, this isn't my opinion - it's fact as shown below.
In regards to the MD&A - and Hexo having enough cash on hand - the following is taken from the MD&A he refers you to. Quinlashes chooses to quote only the first hilited sentence - and ignores the rest of the auditors statement. Basically, if Hexo had been able to extend the Dec 5 $40 million debenture, they WOULD have had enough cash for 12 months. THEY WERE NOT ABLE to get the extension - they no longer have the $83 million to cover the subsequent 12 months.
What quinlashes has posted is inaccurate and misleading. 2. Going Concern These consolidated financial statements have been prepared using International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to a going concern, which assumes that the Company will be able to continue its operations and will be able to realize its assets and settle its liabilities in the normal course of business as they come due in the foreseeable future.
During the year ended July 31, 2022, the Company reported an operating loss of $1,067,725; cash outflows from operating activities of $116,686 and an accumulated deficit of $1,841,584 and has yet to generate positive cashflows or earnings.
The Company had a working capital deficiency of $63,429 and held cash and cash equivalents of $83,238 as at July 31, 2022 ($67,462 at July 31, 2021) which management expects to be sufficient to meet the Company’s expected working capital and operating cash flow needs over the next 12 months.
However, the Company also has 8% convertible debentures that mature in December 2022, which will require a cash repayment of $40,140 if the Company cannot extend the terms. Furthermore, the Company remains subject to, amongst others, a minimum liquidity covenant of US$20 million under the Amended senior secured convertible note as well as a requirement to achieve Adjusted EBITDA of not less than US$1.00 for each quarter beginning in the Company’s third quarter of FY23.
These circumstances lend substantial doubt as to the ability of the Company to meet its obligations as they come due and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern In regards to the $180 million - quinlashes is a bit misleading in stating Hexo has access to it. Yes they - howver one needs to read the details in order to realize that it's capped at a max of $5 million per month (for 36 months) - and that it basically goes toward servicing the $200 million Tilray debt.
It's not as if it's 'free/extra spending cash'.
One of the reasons for the 14-1 reverse split was to get the share price OVER the .30 cent requirement outlined in the agreement. KAOS had temporaily reduced this requirement to .10 cents - as Hexo's share price was around the .155 mark (when tonto bought in at a loss). Hexo would have lost access to the KAOS backstop had they not done the r/s.
The backstop is exchanged for shares at a prime time discount and fees - it's not charity, and it's basically just a a ATM financing, The Company has received a non-binding Letter of Intent for a $180 million equity purchase agreement (the “equity line of credit” or “ELOC”), from an affiliate of KAOS Capital Ltd (“KAOS”), which could provide the Company access
to $5 million capital per month over a 36-month period in order
to help meet debt and interest repayments under the amended and reassigned secured note. The available funds are however restricted by a rolling twelve-month, share issuance limitation, restricting the Company’s ability to issue common shares in excess of 19.9% of the total outstanding common share balance, calculated at the beginning of that period. Under the terms of the equity purchase agreement
a minimum share price of $0.30 per common share is required in order to utilize the ELOC. As of October 31, 2022, the Company received exemptive relief however has yet to file the prospectus supplement qualifying the distribution and resale by the subscriber of the Put Shares and thus has not been able to draw on the ELOC. The Company has filed the required articles in order to consolidate its common shares on a 14:1 basis. The common shares are expected to begin trading on a post-consolidation basis on the TSX and Nasdaq on December 19, 2022 and at which point the Company’s share price is also expected to exceed the minimum share price of $0.30, which remains at the prescribed pre-consolidation amount.
First off you may want to read over the MD&A document on their website, it states that the company has the capitial (cash) available to address the next year. With the SP over .30 it also has access to KAOS funding to the level of 180 Million (in exchange for shares on an as-needed basis).